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Tesla goes to highest-level court in Utah

Published:Sunday | May 8, 2016 | 12:00 AM
A man sits behind the steering wheel of a Tesla Model S electric car.
The Tesla Model X.


Tesla is fighting to sell its sleek electronic cars in Utah, arguing before the state supreme court that laws regulating traditional car dealers don't apply to it because its business model is fundamentally different.

The company built a US$3 million showroom in Salt Lake City but hasn't been able to sell new cars there because officials decided it breaks state laws about car makers owning dealerships.

Tesla has faced similar roadblocks elsewhere and they are still trying to get a licence to sell in four other states Michigan, Texas, Connecticut, and Arizona according to Tesla general counsel Todd Maron.

A proposal to change the law in Utah so that Tesla could sell failed this year after the company pulled its support, saying the fix was too restrictive because it would have barred them from keeping any inventory in the state at a time when they're gearing up to roll out the new, lower-priced Model 3.

The company decided to focus instead on a challenge they filed before the Utah Supreme Court over the decision to deny them a licence.

In court documents filed last Monday, Tesla lawyers argued that restricting their sales in Utah violates a free-market policy enshrined in the state constitution.

"Banning Tesla hurts everyone except the franchised dealers who are fighting so hard to protect their monopoly," Maron said in a statement.

Tesla lawyers argued that the Utah laws are designed to keep automakers from opening up shop and crowding out independent dealers who sell the same cars.

They say the rule doesn't apply to them because they have never sold through dealers.

The state disagrees. The Utah Attorney-General's Office argues that there are still regulations in a free market and laws keeping car makers from unfairly competing with dealerships do apply to Tesla.


Constitutional right


"In essence, Tesla argues it has a constitutional right to sell cars any way that Tesla prefers. But that's not the law no matter how strenuously Tesla UT tries to cloak its preferred business plan in constitutional garb," Utah Solicitor-General Tyler Green wrote in court documents.

He argues that the lack of a dealer licence hasn't hurt Tesla significantly because the company has nevertheless been able to sell 250 cars in the state.

Established car dealers argue that if Tesla gets permission to sell directly to customers, other automakers could move in and do the same thing.

However, Tesla says they can't sell through traditional dealers because they have to convince customers that an electric car is better than an internal combustion engine, a pitch that would be a conflict for a dealer that also relies on regular car sales.

The company did get a used-car licence for their Salt Lake City showroom, which allows people to test-drive and purchase used cars but not new ones.